High prices land century-old textile industry in Gujarat in grave crisis

The century-old textile industry in Gujarat is in a grave crisis. Unusual consumer resistance to high prices in the last few months has resulted in piling up of stocks, and discount sales have not helped.

Sales are at an all-time low, and the mills that are hardest hit are those manufacturing cheap cotton and blended fabrics, indicating that people at the bottom of the income spectrum are buying less and less cloth.

The Ahmedabad Textile Mills Association (ATMA) recently surveyed 19 out of the 66 mills in the city, and came up with alarming figures. Between January and September 1980, the 19 mills made a gross profit of Rs 536 lakh; between January and September 1981, profits slumped to Rs 15 lakh.

Says ATMA President Ajaybhai Chimanbhai: "Textile prices have risen by only 8 per cent in the last three years, but production costs have shot up by 29 per cent. If we pass it on to the consumer, he will just not buy and so we have to stomach huge losses."

Sick Mills: A steep rise in prices of raw materials, escalating power costs, wage hikes and high interest rates have combined to make life miserable for the mills. Cotton prices alone have shot up by 50 to 80 per cent.

In fact, there are fears that a number of cotton mills in the country will have to down shutters, following in the wake of the 48 nation-wide casualties of the last two years. Says Praful Anubhai, chairman, Rustom Mills: "The industry can get back on its feet if the Government rushes financial relief immediately."

With the prevailing credit squeeze, that is not very likely. The Reserve Bank of India had directed nationalised banks in early January to cut down on loans to business houses. Last Diwali, the banks had granted loans to textile mills to disburse bonus payments - the first time such a thing had happened.

The workers, who number over three lakh in Gujarat, are understandably very worried. Says Arvind Buch, president of the two-lakh strong Textile Labour Association: "Workers are upset as they fear the recession may worsen and throw them out of jobs as mills cut down shifts or close."

Four of Ahmedabad's mills have closed down and six are on the verge of doing so. The latest to down shutters was Bhalakia Mills in mid-March, and 2,500 workers lost their jobs. In all, over 10,000 workers have been affected by the closures. The National Textile Corporation (NTC), a government body which has taken over a number of sick mills, does not plan to take over any more because it is already running at a tremendous loss. One long-term solution for the sick mills is modernization. Polyester fabrics are increasingly becoming popular, because of their durability and appearance.

In 1965 the per capita usage of cotton cloth was 14.72m as against 1.73m for blended fabrics. In 1979, the figures were 10.25m and 5m respectively. Use of polyester yarn has increased from 14,000 tonnes to 40,000 tonnes in the last three years.

Trapped: Modernization is not easy however. Starting in 1979, some mills attempted to replace their worn-out machinery but the recession caught them on the wrong foot. Repayment schedules have to be met, and these mills are unable to do so at the moment.

At present, replacing old with new will become virtually impossible, what with banks drawing their purse-strings tight. One sign that the situation borders on the hopeless is the fact that Ahmedabad's 6,000 cloth merchants of two years ago have dwindled to around 5,000. For the moment, there is a silver lining: the ten-week-old textile workers' strike in Bombay has led to a slight improvement in sales since mid-March. This, unfortunately, is only the proverbial straw, for the crisis runs deep.

An executive of a leading mill in the city puts it succinctly when he says: "The sad state of the industry is partly because of inadequate research and development activity." The textile mills cornered vast profits in the last few decades, but little attempt was made to pump in money for its growth. The year of reckoning has come.

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